Northrop Grumman 2012 Annual Report Download - page 39

NORTHROP GRUMMAN CORPORATION
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paid. In 2012, we contributed $367 million to our pension plans, of which $300 million was voluntarily pre-funded,
as compared with $1.1 billion in 2011, of which $1.0 billion was voluntarily pre-funded.
2011 – Cash provided by continuing operations in 2011 was $2.3 billion, as compared with $2.1 billion in 2010. The
increase in 2011 reflects lower tax payments, timing of trade working capital and higher pension contributions. In
2011, we contributed $1.1 billion to our pension plans, of which $1.0 billion was voluntarily pre-funded, as
compared with $789 million in 2010, of which $728 million was voluntarily pre-funded.
SEGMENT OPERATING RESULTS
Basis of Presentation
We are aligned in four reportable segments: Aerospace Systems, Electronic Systems, Information Systems and
Technical Services. This section discusses sales, segment operating income and operating margin rates by segment.
The reconciliation of segment sales to total sales is provided in Note 4 to the consolidated financial statements in
Part II, Item 8, with the difference being intersegment sales eliminations. The reconciliation of segment operating
income to total operating income, as well as a discussion of the reconciling items, is included in the Consolidated
Operating Results section above. For purposes of the discussion in this Segment Operating Results section,
references to operating income and operating income margin rate reflect segment operating income and segment
operating margin rate.
On January 1, 2012, we transferred our missile business (primarily the Intercontinental Ballistic Missile (ICBM)
program) from the Aerospace Systems segment to our Technical Services segment. The segment sales and segment
operating income for the years ended December 31, 2011 and 2010, have been recast to reflect the missile business
transfer. Sales of $494 million and $474 million, and segment operating income of $44 million and $43 million,
were transferred from Aerospace Systems to Technical Services for the years ended December 31, 2011 and 2010,
respectively.
For a more complete description of each segment’s products and services, see the business descriptions in Part I,
Item 1.
AEROSPACE SYSTEMS
Year Ended December 31
$ in millions 2012 2011 2010
Sales $9,977 $9,964 $10,436
Operating income 1,218 1,217 1,213
Operating margin rate 12.2% 12.2% 11.6%
2012 - Aerospace Systems sales for 2012 were comparable to the prior year. Sales of unmanned systems increased
approximately $280 million, primarily related to ramping up on the NATO Alliance Ground Surveillance (AGS) and
Fire Scout programs. Additionally, there was higher volume of approximately $200 million on the F-35 program due
to deliveries on LRIP 5, the first F-35 contract accounted for under the units-of-delivery method. These increases
were offset by the termination of a weather satellite program, which reduced sales by approximately $175 million, as
well as lower sales on the Joint Surveillance Target Attack Radar System (JSTARS), F/A-18 and certain restricted
space programs.
Operating income and margin rate for 2012 were comparable to the prior year. The operating income and margin
rate reflect approximately $90 million lower operating income from the F/A-18 program's lower volume and
transition from the multi-year 2 contract to the lower margin multi-year 3 contract, principally offset by performance
improvements in space systems and higher margin rates and volume on sales of unmanned systems.
2011 - Aerospace Systems sales for 2011 decreased $472 million, or 5 percent, as compared with 2010. The decrease
was primarily due to approximately $430 million lower sales in space systems due to reduced funding for weather
satellite programs and the James Webb Space Telescope (JWST), as well as lower volume for several other space
programs. Military aircraft systems declined approximately $130 million primarily due to lower volume on the F-35
program, which transitioned to a units-of-delivery revenue recognition method beginning with low rate initial
production lot 5, the completion of the aerial targets program and lower volume on EA-18G Growler, offset by
higher volume on Long Endurance Multi-Intelligence Vehicle (LEMV) and JSTARS. These decreases were partially
offset by higher sales at advanced concepts and technology, primarily due to increased volume on restricted
programs.